Acquisitions as a business strategy

Unlocking Business Growth Through Mergers and Acquisitions

In the dynamic landscape of business expansion, there are two primary options for growth: organic or mergers and acquisitions (M&As). While growth can appear better when a company is built organically from the ground up, the reality is that organic growth takes time. In modern business, time is a luxury few are afforded, which is why M&As are an essential business strategy. M&As have challenges; every acquisition differs, and a sound approach is critical for sustainable growth.

One primary concern when considering mergers and acquisitions as a growth strategy is potential disorganisation from disruption and change. The magnitude and speed of change associated with acquisitions can destabilise an organisation. However, a company shouldn't be overcome by these concerns dismissing acquisitions outright can be a missed opportunity. Instead, they should be viewed as challenges and potential opportunities.

A key element in maximising the benefits and minimising the risks of mergers and acquisitions is to target businesses that align with a company's existing business model. Before Arringo acquired QGen, we provided services relating to business development and customer operations, including continuous support for our partners' ongoing relationship with customers and onboarding new customers. QGen, with its strong technology profile, offered synergies that amplified our services and internal work processes. Through this M&A, we added both automation and AI capabilities for the ongoing management of our partners' customers and seamless onboarding experiences, even for the most complex industries, like fintech and blockchain.

Another benefit of aligning M&As with existing business models is that it's likely to complement organic growth. This means that even though growth by acquisition is not organic growth, the second-order effect of a successful M&A can complement a long-term organic growth trajectory. With proper due diligence processes in place, this can be estimated beforehand and help the acquiring entity gauge the long-term prospect and organic value. When viewed this way, M&As can be seen as a complement to organic growth.

A demonstrable track record of sustainable growth must be available to ensure a successful acquisition. Reliable and verifiable data and reports are needed to support claims about past, current, and future performance from a business growth, economic, and sustainability perspective. Through accurate data, the acquiring company can make informed decisions and improve the chances of a thriving merger.

In the same way, the acquiring company must be able to show a solid track record that proves that the leadership and organisation can nurture and elevate the acquired business. The due diligence process is a two-way street that becomes smoother when both parties are confident about each other's success and see mutual benefit.

Integrating businesses with complementary products or services increases revenue and deepens customer relationships. This expansion can capture a larger market share and uncover new, untapped opportunities. Companies usually have a different geographical mix, allowing the acquiring company to expand and sell their core products and services in new territories.

Acquiring businesses in different sectors or with niche offerings can also fortify a company against industry market risks such as cyclical challenges or the dynamics of the global economy diversification becomes a strategic shield.

Integral to our growth strategy, certainly when expanding internationally, M&A remains a key lever in our armour. Admittedly, the prospect of acquisition can be a massive undertaking, as well as the inherent risks. Not only in terms of financial, we are rigorous in our consideration of the potential impacts to existing portfolios. This extends to the optimal strategic direction, to strengthen market share in existing segments, harmonise company offerings or diversification.

Overall, using acquisitions as a growth strategy can be an accelerator to boost competitiveness, scalability, and overall profitability. Coupled with a well-considered organic growth strategy, M&As can be a game-changer with unprecedented efficiency compared to solely relying on internal resources and organic growth.